Can a strategy based on a random input with a suitable output and money management be profitable? Dr Van Tharp in his book Super Trader, said he did the test in 10 markets over a period of 10 years, and says the results were positive in a consistent manner.

“It didn’t make a lot of money and you had to live through some nasty drawdowns, but over the 10 years it made money.” Super Trader p.149.

Is it possible to reproduce such results in Forex. This is the subject of today’s article. The test protocol will be as follows:

Because of the random nature of the input, the results will be different from one test to another, for the same currency pair and the same period. For this reason, and for the test to be meaningful, I did 10 tests for each currency pair and calculate the mean and standard deviation at the end of the table.

1- Test without money management

EURUSD

GBPUSD

USDCHF

USDJPY

USDCAD

AUDUSD

NZDUSD

$

-1960

-8506

-569

-2795

-5749

-8320

1979

$

519

-2791

2089

-1002

-3449

4027

-4470

$

4195

-5512

3155

-1293

-3232

1117

895

$

-1027

-3970

-613

-1520

-148

-5249

-2963

$

2728

-1380

1962

-78

560

1349

164

$

-3158

-1388

-2237

821

-586

-9438

-3672

$

-1093

3936

322

1194

591

-1959

-5382

$

-1214

-5877

-438

-1731

-381

-4870

-3745

$

-1246

2631

-354

-4504

-471

-4179

-1053

$

1798

-4584

4190

2220

1216

-2836

-2249

Moyenne

-46

-2744

751

-869

-1165

-3036

-2050

-1308

Ecart-type

2300

3841

2006

1988

2229

4295

2453

2730

2- Test with money management (1% of capital)

EURUSD

GBPUSD

USDCHF

USDJPY

USDCAD

AUDUSD

NZDUSD

$

-518

148

439

268

-258

196

168

$

-195

51

1215

181

831

-269

-595

$

471

0

-433

-919

-581

-1232

91

$

973

-1227

120

-374

-1237

463

-881

$

-67

85

476

300

955

-1243

-1937

$

749

1028

-666

26

-519

-2067

-1182

$

-136

-963

259

778

-1246

-571

-684

$

1021

-896

-868

831

395

-2858

-448

$

-140

520

-845

477

103

647

-1584

$

855

-693

889

569

292

-964

-504

Moyenne

301

-195

59

214

-127

-790

-756

-185

Ecart-type

572

722

733

534

778

1119

670

733

Conclusion

It is clear that the result is negative. Therefore, such a strategy can not be used to trade Forex. Money management has greatly improved the result (-185 ± 733 instead of -1308 ± 2730), as well as the average standard deviation, but not to the point that the strategy becomes usable. However, the use of trailing stop may be interesting to compare and evaluate the different inputs that give advantage compared to a random input. This makes another tool we will use in future articles.

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Investing in the stock market involves risk. Some financial products, such as Forex, are highly speculative and any investment must be made ​​with caution. The price is subject to market fluctuations and past results are not a guarantee of future results. This site is an information site only.